Enterprise Product Sales and International Revenue Growth Highlight Dell's Third Quarter; Strong Revenue Increases Reported for Storage, Servers and Enhanced Services

Business Wire, Nov 10, 2005

ROUND ROCK, Texas -- Dell Inc. (NASDAQ:DELL):

Continued successful application of Dell's unique direct business model and solid sales increases in enterprise products and services led the company to record revenue and units in fiscal third quarter 2006.

Dell had record shipments of 9.2 million units worldwide in the quarter. The quarter was led by a 36 percent increase in revenue from enhanced services to $1.2 billion, a 35 percent increase from storage and a 16 percent increase from servers.

Sales outside of the United States rose 20 percent from the same period a year ago and accounted for 40 percent of Dell's worldwide revenue in the quarter. Asia Pacific and Japan had particularly strong revenue growth of 20 percent year-over-year, led by rapid expansion in China with unit growth of 46 percent.

Company revenue for the period ended Oct. 28 was $13.9 billion, a company record and up 11 percent year-over-year. Dell's earnings per share was 39 cents on a non-GAAP basis, up 18 percent from a year ago. Reported GAAP third-quarter earnings was 25 cents per share, reflecting a previously announced one-time charge of $442 million. The charge consisted of the cost of servicing certain OptiPlex systems that include a vendor part that failed to perform to Dell's specifications, workforce realignment, product rationalizations and excess facilities.

Third Quarter               Year to Date
(in millions,      FY'06    FY'05   Change    FY'06    FY'05   Change
 except share    -------- -------- -------- -------- -------- --------
 data)

Revenue          $13,911  $12,502    11%    $40,725  $35,748    14%
Non-GAAP
 Operating
 Income(a)       $ 1,196  $ 1,095     9%    $ 3,543  $ 3,067    16%
GAAP Operating
 Income          $   754  $ 1,095   (31%)   $ 3,101  $ 3,067     1%
Non-GAAP Net
 Income(a)(b)    $   944  $   846    12%    $ 2,813  $ 2,376    18%
GAAP Net Income  $   606  $   846   (28%)   $ 2,560  $ 2,376     8%
Non-GAAP
 EPS(a)(b)       $  0.39  $  0.33    18%    $  1.14  $  0.92    24%
GAAP EPS         $  0.25  $  0.33   (24%)   $  1.03  $  0.92    12%

(a) Non-GAAP results for the three- and nine-month periods ended
    October 28, 2005 exclude certain charges. See Itemized
    Reconciliation between Net Income on a GAAP and non-GAAP basis for
    the period ended October 28, 2005 table below.

(b) Non-GAAP results for the nine-month period ended October 28, 2005
    also exclude the impact of an $85 million ($0.03 per share) tax
    benefit related to a revised estimate of taxes on the repatriation
    of earnings under the American Jobs Creation Act of 2004 recorded
    in the second quarter of fiscal year 2006.

"Our operating performance was again exceptional by any comparable measure," Kevin Rollins, Dell's chief executive officer, said. "However, we hold ourselves to higher standards."

As such, Mr. Rollins said, Dell has made recent moves that further streamline several parts of its business.

"We're always looking for better ways to improve the efficiencies of our business," he said. "Customers in every major market of the world are significantly and increasingly choosing to do business directly with Dell, so we are able to make these changes from a position of strength. The changes will reduce complexity and cost, improve customer value and satisfaction, and encourage strong profitable growth in all products, segments and regions."

Cash flow from operations for the quarter was $1.1 billion and $3.3 billion year-to-date. Dell ended the quarter with $12.3 billion in cash and investments. Dell spent $1.4 billion to repurchase 41 million shares during the third quarter and year-to-date has repurchased almost 140 million shares.

The company expects fourth quarter revenue of $14.6 to $15.0 billion and earnings per share of $0.40 to $0.42. The company plans to repurchase at least $1.7 billion in stock during the fourth quarter.

Product and Service Performance

Dell continued to hold the No. 1 worldwide share position for computer shipments. Globally, the company had a 21 percent increase in server shipments year-over-year. Dell's server offerings were enhanced during the quarter with the addition of multi-core Intel Xeon technology in the single-, dual- and four-socket server and workstation product lines, delivering up to 51 percent greater performance while maintaining a common system image for both single- and multi-core systems.

Revenue for storage products, up 35 percent year-over-year, grew at a rate of more than three times that of the industry. Demand for server and storage products also helped drive revenue growth for Dell's enhanced services of 36 percent year-over-year. Dell continues to make investments in its service operations and expand its offerings to continue improving support for all customers. In a recent survey of IT executives by CIO Magazine, Dell was rated No. 1 among leading vendors for providing "impeccable customer service."

With the increasing flexibility of wireless Internet access, more customers are moving from desktop platforms to wireless notebook computers. Sales of Dell's mobility products in the quarter continued to reflect the shift as shipments increased 38 percent year-over-year. Software and peripherals revenue grew 25 percent year-over-year, driven by imaging and displays. Dell's laser shipments doubled year-over-year, led by growth in color laser printer shipments. Shipments of replacement ink and toner cartridges also nearly doubled year-over-year.